Nerd-turned-flamboyant-promoter likes gold, stocks

PeterBrimelow

This is an update to correct the spelling of Navellier in the second headline and the second paragraph.

NEW YORK (MarketWatch) -- A key letter editor says don't let gold's gut-check fool you -- the yellow metal is headed up. But how would he know?

Louis Navellier was one of the wunderkinds of the investment-letter industry when he arrived on the scene in the early 1980s. He took a distinctly nerdish Modern Portfolio Theory approach, and his first letter -- now called Louis Navellier's Emerging Growth -- broke the curve for a remarkable length of time.

I named Navellier's investment letter Letter of the Year in 2004. (See Dec. 27, 2004, column.) It still shows a lifetime (post-1984) performance of 13.6% annualized by Hulbert Financial Digest count, as compared to a 10.1% annualized for the dividend-reinvested Wilshire 5000 Total Stock Market Index.

In 1997, Navellier diversified into a second service -- Louis Navellier's Blue Chip Growth Letter -- although I distinctly remember him telling me that his system worked best with small-cap, less-followed stocks. By HFD count, this letter is up 6% annualized, versus 2.9% for the total return Wilshire 5000.

Note, however, that these letters' early success masks recent problems. Both have seriously underperformed the market in recent years, perhaps not surprising given that Navellier is fully invested at all times.

Some five years ago, Navellier reinvented himself dramatically, or was perhaps was reinvented by his new partners Phillips Publishing, notoriously ruthless promoters. He developed a flamboyant promotional persona and began opining on a wide range of subjects that, as far as I can see, had nothing to do with Modern Portfolio Theory -- such as gold. (See July 14, 2006, column.)

Which, of course, does not mean that Navellier is not right now.

Over the last 12 months Navellier's Blue Chip Growth Letter is up just 14.46% by Hulbert Financial Digest count against 27.10% for the Wilshire.

But that didn't stop Navellier saying in his December issue: "Our fundamentally superior stocks continue to lead the market, and as the bull market gathers momentum, we are in store for even bigger gains going forward. The economic landscape is improving by the day, and it's putting everyone from Main Street to Wall Street in a better mood. Sentiment is improving, and I expect the good cheer to fuel a strong rally that will spill over to the New Year."

Navellier identified three major problematic trends going forward.

First: "Big Deficits and a Weak Dollar." Navellier says this will boost commodity stocks and multinationals, who earn overseas.

Second: "High Unemployment." But Navellier argues that "deep job cuts over the last year or so have actually done a lot to help businesses stay afloat. As a result, we are in a business-driven rebound, and corporations at last have free cash to ramp up spending and production."

Third: "The Rise of Emerging Markets." Navellier writes that in 2009, "the strength of global blue chips became clear, and our Blue Chip Growth strategy evolved with this trend. In July, I unveiled the groundbreaking addition of ETFs to our portfolio, and one of the first funds I recommended was the iShares S&P Global Materials Sector Index ETF
MXI, -0.32%
as a way to capitalize on the strength of the international stocks. In the months that followed, more than half of my ETF recommendations would be funds with a global focus."

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